Friday, February 01, 2008

[TN: Above I reviewed in LR A.N. Filippov’s most distasteful book Recent Russian History 1945-2006, Prosveshchenie Publishers, 2007. For a fuller flavour and so that LR readers can get their minds right, I thought it would be useful to have the full explanation of the oligarch situation in English as we have clearly been labouring under major misapprehensions until now, possibly due to a culture clash.]

The Clash with the Oligarchs

Vladimir Putin’s first actions in the post of Prime Minister and later acting President aroused the discontent of a number of the oligarchs. On 28 February 2000, at a meeting with representatives of great capital, Putin explained that he would not tolerate business interfering in government decisions and furthermore would not tolerate attempts by big business to privatise government authority. The principle that business should be properly distanced from power applied to all and the President’s actions proved that this was not empty rhetoric but a thought-through policy.

A major section of the oligarchs resigned themselves to this situation. However, two representatives of that community – the media magnates V. Gusinsky and B. Berezovsky – were not ready to acquiesce in the loss of their leverage on the government. The years 2000-2001 were marked by conflicts with these two oligarchs. For the government, it was a question of breaking up the system whereby the oligarchs controlled the mass media. The destruction of oligarchic control of the mass media was a necessary condition of the return to the state of its rightful control and authority, all the more so since the oligarchs controlled was not held on a lawful basis.

In modern mass society, control of the mass media is one of the key elements for influencing policies because policies depend on public opinion and that, in its turn, is to a considerable extent formed by the mass media. Control by the oligarchs of the electronic and printed mass media was one of the prime elements of oligarchic leverage on government policy in the second half of the 1990s.

When Gusinsky failed to repay on time credits granted by Gazprom and Sberbank, bankruptcy proceedings were started against the NTV television channel to return it to state ownership. In the end, ownership of NTV was transferred to Gazprom-Media-Holding and Gusinsky received $300M for his shares in the company, after which he emigrated from Russia. Government control was later reestablished over the ORT television channel. Legally, the channel had always belonged to the state, which owned 51% of its shares. A stop was put to B.A. Berezovsky’s usurpation of the owner’s rights by a simple change of management.

In this way all attempts to blackmail the state via control of media resources were cut short. Gusinsky and Berezovsky continue to remain in exile abroad. The former has abandoned public politics while Berezovsky continues regularly to publicise in the Russian and foreign media his criticisms of the actions of the Russian authorities and in 2006 openly declared that his activities are directed at the violent seizure of power in Russia.

The next clash between the government and the oligarchs took place in 2003. On 25 October, M. Khodorkovsky, the owner of Russia’s largest oil company – Yukos, was arrested in Novosibirsk airport, charged along with his closest associates with tax evasion and fraud. Khodorkovsky’s defenders assert that he is being persecuted for political reasons – because he was financing opposition parties. It is true that prior to the State Duma elections the owners of Yukos tried to ensure a majority for themselves in the future parliament by financing several political parties at the same time in exchange for having their people included in the lists. Fairness requires one to admit that M. Khodorkovsky was financing not only opposition parties but pro-government ones as well. This was not so much opposition but rather an attempt by the oligarchs to get their own back by corrupting parliament and the whole party system irrespective of the parties’ political platforms and allegiances.

In addition to this, the state had just made a declaration on the need to protect strategic energy resources as a component of the state’s security. The point of the “Yukos affair” was that the state, as its gathered strength, was sending a clear message to big business: obey the law, pay your taxes, and don’t try to put yourself above the state. That message was heard loud and clear. In 2004, following the “Yukos affair”, federal tax receipts collected fro the major tax payers rose by 133.8% against 2003 receipts. In addition, the trend in the oil companies’ corporation taxes in 2002-2003 had been downward and then in 2004 rose immediately by 225.3%. Some companies, seeing how the “Yukos affair” had gone, voluntarily offered to pay back taxes. The “Yukos affair” finally buried the oligarchs’ hopes of preserving their control over the Russian state.

Point of View

[TN: these are frequently interjected in Filippov’s book, supposedly to vividly illuminate the previous section]

The case of the Yukos oil company is a many similar to that of the America’s Standard Oil which, at the end of the 19th and beginning of the 20th century, had monopolised the oil transportation market in the USA and was aggressively swallowing its competitors and demonstrating a great capacity for lobbying. By the early 1900s, the monopolies’ strength in the USA was undermining the power of the federal government. Big businessmen were putting the interests of their corporations before national interests and frequently getting the interests of their enterprises placed before national ones. Public discontent at the activities of the monopolies ensued because the interests of the majority of citizens were being ignored in a chase after profits that threatened the proper functioning of the state. American citizens did not believe the state capable of ensuring ‘fair play’. The federal powers began a campaign against the monopolies. The main target was Standard Oil, head by John Rockefeller. US President T. Roosevelt supported the General Prosecutor’s investigation of the activities of the big corporations. A case against Standard Oil was started in 1906 and in 1907 sever writs against the company were issued. Rockefeller himself might have been taken to court; however, he agreed to cooperate with the prosecution. The trial found that the company and its management were guilty of breaking anti-trust law. Standard Oil was broken up into 38 different companies. This was a clear signal to big business that they needed to conduct their affairs in a way that took account of the interest of the state and society.

[TN: …and the similarities continue, dear Filippov. According to Wikipedia on May 15, 1911, the US Supreme Court upheld the lower court judgment and declared the Standard Oil group to be an "unreasonable" monopoly under the Sherman Antitrust Act. It ordered Standard to break up into 34 independent companies with different boards of directors. Standard's president, John Rockefeller, had long since retired from any management role. But, as he owned a quarter of the shares of the resultant companies, and those share values mostly doubled, he emerged from the dissolution as the richest man in the world” while Khodorkovsky was packed off to a concentration camp.]

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